1. Field of the Invention
The present invention relates to investment-style insurance mechanisms, and more particularly, to a method and related system for handling an investment insurance policy through use of a capital bidding mechanism which allows participating users to win a bid to deposit money or raise funds for investment to expand credit, or opt out of bidding to take advantage of more stable interest rates. The insurance can exempt risk of the interest rate, and earn handling fees to provide stronger protection for the insured party.
2. Description of the Prior Art
As the Internet increases in speed, security, and availability, new products and services are being developed daily to meet the demands of consumers who are growing accustomed to making all manner of business transactions online from the comfort of their home. Today, online brokers, banks, and funds offer a large variety of high-yield, high-return investment products. The insurance industry is also incorporating investment strategies into their policy offerings. Previously, insurance policies resembled black holes, where premiums were paid up front and only come back out if disaster struck. Some insurance policies now offer returns on premiums already paid, such that capital remains active while it is in the policy. Examples of such new types of insurance policy include savings style insurance, participating insurance, and investment style insurance, which are rapidly taking over a market originally dominated by traditional insurance policies.
However, these new types of insurance policies are offered to the consumer at a certain risk on the interest to the insurance company. For example, ten years ago, Cathay Life put out a principal-protected 5% fixed rate savings style insurance plan, which attracted a tremendous number of policy buyers. However, as rates have dropped sharply in recent years, the promised 5% fixed rate has placed a great financial burden on Cathay Life. This example illustrates risk to the insurance company, but the consumer also takes a risk when selecting the insurance policy, depending on market conditions over the life of the insurance policy. Typically, once the terms of the policy are set, the consumer is bound by the terms, and may lose their ability to take advantage of favorable market conditions, or to avoid unfavorable market conditions, by adjusting the terms of their policy. For example, in a bear market, the savings style insurance policy may be attractive, whereas the savings style insurance policy may seem like a frozen asset when markets are hot. Conversely, the investment style policy may be very satisfying when the economy is strong, but likewise may feel like a bomb that could explode at any minute during a recession.
U.S. Pat. No. 5,655,085 (hereafter '085), titled “Computer System for Automated Comparing of Universal Life Insurance Policies Based on Selectable Criteria,” discloses a computer system used for quickly providing consumers with universal life insurance policies optimized for specific needs of the consumers, such as a low premium. This increases bid selection efficiency for investment style policies. However, although '085 provides increases in speed and convenience to the consumer as far as selecting a policy, investment is always accompanied by risk, and the consumer should be presented with information about loss that may be associated with prevailing market conditions. '085 fails to provide a capital shelter for the policy-holder, while also failing to reward the policy-holder with increased credit and opportunities for better investment returns when the policy-holder invests wisely based on their accurate appraisal of market conditions.
U.S. Pat. No. 6,049,772 (hereafter '772), titled “System for Managing Hedged Investments for Life Insurance Companies,” discloses a system for mitigating risk to the policy holder and the insurance company through analyzing investments related to individual policies, and purchasing corresponding options, calls, and other hedging vessels. The amount of risk allowed can be set with “caps and floors.” Although hedging effectively reduces investment risk related with the insurance industry, it is unable to eliminate the investment risk. Further, hedging necessarily decreases the operating position of the main product, thus reducing overall returns. Investment derivative products are also influenced by different regulations in different countries, which makes '772 hard to implement. Thus, '772 does not provide an ideal method for reducing risk in investment style insurance policies.
U.S. Patent Application 2002/0165740 (hereafter '740), titled “Investment Style Life Insurance Product that Allows Consumer to Control and Replace Individual Policy Components,” gives policy-holders an option to transfer their term life insurance policy to an investment style policy. The policy-holder may also transfer assets, liabilities, and rights to the investment style policy provider, and the investment style policy will be adjusted to include the assets, rights, and liabilities, or similar assets, rights and liabilities, thus allowing the policy-holder to control and adjust which types of assets, rights, and liabilities underlie the policy. This allows the policy-holder to connect personal assets to their policy, but also limits the investment scope of the policy, and does not allow the policy-holder to expand their credit. Further, '740 is only practical for use with customers who have large personal wealth, and cannot meet the needs of normal consumers.
Thus, the prior art while attempting to mitigate risk associated with investment style insurance policies, particularly the risk of interest rate traditionally ailing the insurance industry, which may induce bankruptcy of the insurance company, is unable to provide a solution that simultaneously mitigates the risk, is broadly applicable to all levels of investment, and does not allow policy-holders to expand their credit off of their policy investments. In other words, the policy-holders of the insurance style policies of the prior art are still open to risk, unable to take advantage of both savings and investment, and further experience an indirect loss due to their inability to take advantage of credit expanding opportunities based off of their investment.